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2008: Giving Dropped 6.4 Billion Dollars

June 11, 2009 Mark Hrywna

Overall giving in the United States declined last year by 2 percent, the largest drop since records have been kept and the first since 1987. Giving by individuals again made up about three-quarters of all giving but declines in foundation endowments and grantmaking might make for an even more challenging environment for next year’s report.

The $307.65 billion estimate in giving last year represents a decline of $6.42 billion, or 2 percent, but 5.7 percent when adjusted for inflation, the largest drop recorded since Giving USA has been keeping track of America’s donations. Total giving was still estimated to be around 2.2 percent of Gross Domestic Product (GDP).

Giving by individuals was $229.28 billion — about 75 percent of all giving — but down almost 3 percent from the previous year, 6 percent when adjusted for inflation. Bequests, which made up 7 percent of overall giving, or $22.66 billion, were down 2.8 percent (6.4 percent inflation adjusted). Corporate giving was off 4.5 percent (8 percent), totaling $14.5 billion, or 5 percent of all donations.

The revised figure for 2007 overall giving was $314.07 billion, $7.68 billion or 2.5 percent, more than the original estimate last year of $306.39 billion. The giving numbers are adjusted as more information becomes available.

The 54th annual report on philanthropy, Giving USA, a publication of Giving USA Foundation™ researched and written by the Center on Philanthropy at Indiana University, was released on Wednesday (June 10).

“There was no doubt in anyone’s mind that charitable giving would be down,” said Del Martin, chair of Giving USA Foundation. “However, what we find remarkable is that individuals, corporations and foundations still provided more than $307 billion, despite the economic conditions,” she said.

“It would have been easy to say ‘not this year’ when appeals came their way and we definitely did see belt-tightening. This drop in giving meant that nonprofits have had to do more with less over the last year, but it could have been worse,” she said.

The only subsectors that experienced an increase last year were religion, public society-benefit and international affairs while foundations and human services saw the largest declines:

Deductions carried over and unallocated were estimated to be about $19.39 billion, about 6 percent of total giving last year. Foundation grants to individuals accounted for 1 percent, or $3.71 billion.

The largest drop in giving among subsectors was at foundations, which still comprised 10.6 percent of the overall charitable pie. And despite the increased need reported by human services organizations last year, those agencies received 9 percent of all giving.

Giving to the public society benefit subsector — which includes entities that collect money and then redistribute it, such as United Way, Combined Federal Campaign, donor-advised funds — made up 8 percent of overall giving and international affairs groups comprised about 4 percent of total giving.

Though education saw a drop, it still accounted for 13 percent of all charitable dollars, second only to religion at 35 percent.

The numbers suggest a historic level of decline in the education subsector, one not seen in three decades, according to John Lippincott, president of the Council for Advancement and Support of Education (CASE) in Washington, D.C.

Giving USA’s education subsector includes libraries and reading programs, in addition to higher education and private schools, Lippincott said, but a 5.5-percent drop when higher education has been averaging 7-perceent increases would still represent a major decline. A the same time, he said a 5.5-percent dip in this economic environment actually sounds pretty good relative to declines in the stock market and GDP against rising the unemployment rate. “While nobody likes to see a decline, on the other hand, if you look at the continued return that fundraising provides to educational organizations, it’s still an incredible good investment,” Lippincott said.

One encouraging aspect of the report is that giving is estimated to remain at 2.2 percent of GDP, said Elizabeth Boris, director of the Center on Nonprofits and Philanthropy at The Urban Institute in Washington, D.C. “We’ve maintained the level of effort,” for the past 10 years, she said, adding that between 1972 and 1996, giving was estimated to be less than 2 percent of GDP.

“The dip in individual giving was expected, but the surprise for some will be that foundation giving stayed relatively stable,” said Boris, reflecting the lag between the drop in endowments and its effect on giving. “This year (2009) and next will be harder hit,” she said, adding that “that drop is likely to affect the grants of many foundations that rely on one year’s gifts to finance the next year’s giving.”

There also might be a “double whammy” this year — and perhaps next year — if there are both reduced endowments and lower amounts from pass-through foundations, Boris said.

The new statistics don’t reflect the deterioration of the market and endowments last year, and what it means for 2009, said Steve Gunderson, president and CEO of the Council on Foundations (COF).

While Giving USA indicates a 3-percent increase by foundations in current dollars, “The truth is that may or may not have happened in 2008,” said Gunderson. He pointed to a COF survey early this year that found 62 percent of foundations predicted they would reduce their grantmaking in 2009, which would be evident in next year’s Giving USA study. Even if there is a collective, positive stock market rally at the end of this year, Gunderson said foundations won’t see that until 2010.

Community foundations, in particular, have been hit hard, first because of the declining value of their endowments, but also the lack of additional or new gifts because of the economy, according to Gunderson. The biggest impact on family foundations, meanwhile, depends on the size and commitments they have, he said, adding that there’s been some evidence in the last year that smaller family foundations have chosen to convert to a donor-advised fund within a community foundation. Other larger foundations have decided to go into their endowments to maintain their grantmaking, he added.

Lester Salamon, director of the Center for Civil Society Studies at the Johns Hopkins Institute for Policy Studies in Baltimore, Md., said a decline in foundation giving is likely to continue considering the three-year rolling average upon which their grantmaking is based. Giving to foundations was one of the sharpest declines because that involves the giving of stock and other assets, he said, and there’s still market uncertainty for 2009.

Foundation giving in 2009 is likely to be shaped by access levels in 2008, and those were pretty sharply down, Salamon said, so unless foundations make the decision to boost giving based on 2009 he expects a decline in foundation giving going into next year.

As for 2009, corporate giving will be challenged in a number of ways, but won’t go away completely, bequest giving is always an unknown, said Nancy Raybin, chair of The Giving Institute: Leading Consultants to Non-Profits, while foundations may dip into their endowments to support organizations as they have in the past. “There are a lot of unknowns out there trying to project 2009,” she said.

Since individual giving makes up the bulk of the donations, Raybin said giving should be OK if individuals make decisions to support their favorite charities and continue at current levels.

There is little doubt that 2009 will continue to be a challenging year as well, Lippincott said, but if historical patterns hold — a big if, he concedes — a comeback in giving might be rapid and significant as people retain confidence in the economy and their financial situations.

The annual estimates in Giving USA are based on econometric studies using tax data, government estimates for economic indicators, and information from other research institutions. Sources of data used in the estimates include the Internal Revenue Service, Bureau of Economic Analysis, Foundation Center, Independent Sector, Council for Aid to Education, National Center for Charitable Statistics at the Urban Institute and National Council of Churches of Christ.